First Mover Asia: Crypto Companies Struggle With Layoffs, but Some See Opportunity to Add Talent; BTC, ETH Soar After Fed Rate Hike

Good morning. Here’s what’s happening:

Prices: Bitcoin and ether soar after the Federal Reserve raises interest rates.

Insights: Crypto firms reckon with layoffs, but the bear market may create opportunities for a few companies.

Prices

●Bitcoin (BTC): $22,911 +8.6%

●Ether (ETH): $1,628 +15.7%

●S&P 500 daily close: 4,023.61 +2.6%

●Gold: $1,733 per troy ounce +0.9%

●Ten-year Treasury yield daily close: 2.73% −0.05

Bitcoin, ether and gold prices are taken at approximately 4pm New York time. Bitcoin is the CoinDesk Bitcoin Price Index (XBX); Ether is the CoinDesk Ether Price Index (ETX); Gold is the COMEX spot price. Information about CoinDesk Indices can be found at coindesk.com/indices.

Bitcoin and Ether Soar After Fed Rate Hike

By James Rubin

The U.S. central bank delivered as expected, raising interest rates 75 basis points. Crypto markets shrugged, continuing their two-day journey upslope, with bitcoin jumping 10% at one point following the Federal Reserve announcement. Ether soared more than 16% at one point.

Bitcoin was recently trading at about $22,900, up over 8% for the past 24 hours. The largest cryptocurrency by market capitalization has mostly lingered between $21,000 and $23,000 for much of the past 10 days. Ether was recently changing hands just above $1,600, up more than 15% over the same period. Other major cryptos spent much of Wednesday in the green, with ETC up more than 30% and UNI and AAVE each rising over 20%.

Many market observers believed markets had already accounted for the Fed's rate hike, which the bank has been foreshadowing for over a week. "A lot of people are saying that the rate hike right now is baked in just because the Fed has telegraphed for quite a while ... and even equity markets have been setting quite a bit," Katie Talati, head of research at asset management firm Arca, told CoinDesk TV's "First Mover" program prior to the Fed announcement.

Talati added: "We're going to continue to see weakness in equity markets. Since that correlation is pretty high with the crypto market right now, that's actually going to be what kind of cascades down into and trickles down into crypto markets."

Crypto prices tracked equity indexes upward on Wednesday after investors reacted favorably to Fed Chair Jerome Powell's comment the bank would continue its monetary hawkishness to tame inflation, but that it might also back off the recent drumbeat of robust rate hikes at some point. Powell also noted the U.S. economy had yet to fall into a recession, as many observers had anticipated, pointing to the torrid job market that has added 2.7 million jobs this year. "It doesn't make sense that the economy would be in recession," Powell said.

Quarterly earnings continued to offer a confounding mix of upbeat and lesser news – sometimes within the same report – with Boeing (BA) on Wednesday saying profits had declined but also showing cash flow numbers positive for shares. Google parent Alphabet (GOOG) on Tuesday reported its weakest growth in two years but also that ad revenue exceeded expectations. On Wednesday, Meta Platforms (FB) said it had finished with its first-ever revenue drop.

The tech-focused Nasdaq closed up a whopping 4.1%, its largest single-day increase since 2020, while the S&P 500 rose 2.6%.

The crypto industry continued to reel from the announcement earlier this week that the U.S. Securities and Exchange Commission (SEC) is reportedly probing crypto exchange Coinbase (COIN) on suspicion it allowed U.S. persons to trade unregistered securities. On Tuesday, bitcoin advocate Cathie Wood’s Ark Investment Management sold a total of more than 1.4 million Coinbase shares.

Saylor on the Ethereum attack

Meanwhile, MicroStrategy (MSTR) founder and bitcoin evangelist Michael Saylor took his latest shots at Ethereum at the Blockchain Economy conference in Turkey, questioning the economic, technological and ethical soundness of the protocol. Saylor has raised doubts about Ethereum before, so his comments were unsurprising, although noteworthy for their harshness.

"Right now we don’t know the monetary policy of Ethereum and it’s just not clear what it is for the next 36 months, much less the next 1,000 years," Saylor said. "So 'technically sound' means I need to see the protocol function for that thing after about five to 10 years. So we don’t know that either. Because if you are hard forking and changing it. Every time you do a big upgrade you introduce new attack surfaces."

He added: "And then 'ethically sound' means I need to know that nobody could change it, which means which includes Vitalik [Buterin, Ethereum's co-creator]. I need to know that no one at the Ethereum foundation, no individual can change the protocol, because if they could change the protocol it makes it a security. If it makes it a security then it’s not going to become global money."

Saylor's comments came as Ethereum's 10th "shadow fork" went into effect on Tuesday, 26 hours earlier than expected. The network's tests ahead of the anticipated shift from an energy-intensive proof-of-work protocol to proof-of-stake have helped spur recent price gains. The shadow fork brings the project one step closer to Ethereum's mainnet upgrade in September. The third and final testnet merge, Goerli, is expected to happen Aug. 10.

"The merge is going to be one of the most bullish events for this year for any crypto asset," Arca's Talati said. "The shadow merge today is going to be giving more clarity on what that [launch] date will actually look like. Most are expecting end of September right now."

Biggest Gainers

Asset Ticker Returns DACS Sector Ethereum ETH +15.7% Smart Contract Platform Polygon MATIC +15.7% Smart Contract Platform Avalanche AVAX +14.6% Smart Contract Platform

Biggest Losers

There are no losers in CoinDesk 20 today.

INSIGHTS

Layoffs Are Hurting Crypto Companies

By Shaurya Malwa

Declining crypto and equity markets and contagion among crypto companies following the implosion of the Terra ecosystem in mid-May have hit the industry hard in perhaps its most crucial area – its workforce.

Layoffs have accelerated over the past two months, with prominent firms jettisoning talent that helped them climb during the bull market. An estimated 3,726 jobs have been lost as of July 21, 2022, based on media reports and press releases. The layoffs have hurt morale and weakened some firms, although a few companies have seen the bear market as an opportunity to add talent.

Cutting cost centers

Crypto markets often humble their participants, and the reality check arrived in the form of companies cutting “cost centers” that directly impacted their profitability. Coinbase cut as many as 1,000 jobs in June, while Bullish, Celsius Network and Huobi let go of as much as 30% of their headcount.

Some market observers say the firings have resulted from extensive hiring during a time of plenty.

“When analyzing the companies that are firing employees, most of them went through a very large employment campaign during the bull market” said Bruno Macchialli, CEO of crypto management platform Delchain.

“Coinbase, before the layoffs, had more than 5,000 employees. In comparison, FTX or Bitfinex has around 200-250 employees and keep hiring talent even during the crypto winter,” he said.

The moves affect former employees’ wellbeing, Macchialli pointed out: “When working in a company that is not strong financially due to the market decrease, a level of stress can be created on employees,” he said.

“The crypto winter sentiment will negatively impact some employees and can make them doubt the long-term benefits of the crypto economy,” he added.

These moves are expected to cause mistrust in the overall crypto ecosystem for job seekers, said Scott Scherer, CEO of real estate tokenization firm OwnersUnity.

"Most crypto projects hire based on their needs, project roadmap and availability, which is limited in number and budget,” Scherer said. “By reducing resources they will spread departments too thin, which can affect performance and confidence in the market.”

A few add jobs

Still, some say laid-off employees may be picked up by players looking to attract experienced talent during a bear market.

“Companies like OpenSea, Compass Mining and Blockchain.com have cut between 15% and 25% of their staff,” said Mattias Tengblad, CEO of blockchain music platform Corite. “This action might at first seem to be detrimental to the company's reputation and staff morale, but well-established projects will have the chance to acquire talented candidates. “

Observers also note that the so-termed crypto winter could be a chance for crypto industry hopefuls to enhance their skills.

“On a positive note, the crypto winter is the occasion for employees to work on their crypto knowledge and train themselves,” Delchain’s Macchialli said, adding that companies can also take this time to develop the infrastructure needed to support the next bull run as they can allocate more time on this.

Corite’s Tengblad shares the same sentiment. “There will always be a purge during a down market, but we can choose to see it as an issue or a great chance for projects to build more products,” he said.

Exchanges like KuCoin are flaunting up to 300 vacancies as they seek to double down on crucial hires in a bear market. Binance shows nearly 900 open positions, while a LinkedIn search shows more than 8,000 job postings for crypto-related positions.

The crypto market remains attractive for future jobseekers, OwnerUtility’s Scherer opines. “Crypto will remain a high growth industry in the years to come, so there will always be new positions opening up for people who may have been laid off elsewhere,” he concluded.

Important events

Bitcoin & and Crypto Mining Conference (Miami)

The Digital Asset Compliance & Market Integrity Summit (New York)

CoinDesk TV

In case you missed it, here is the most recent episode of "First Mover" on CoinDesk TV:

CFTC Commissioner Pham on Crypto Regulation; Fed Set to Raise Rates, What Does it Mean for Crypto?

"First Mover" dove into today's top stories in crypto, including the latest news from the regulatory front and reaction to reports that crypto exchanges Coinbase and Kraken are under investigation. Host Amitoj Singh spoke with CFTC Commissioner Caroline D. Pham. Also joining were Katie Talati of Arca to discuss the crypto markets and Alex Bornyakov, Ukraine Deputy Minister of Digital Transformation.

Headlines

DeFi Has Become Crypto Crime’s Main Arena, Crystal Blockchain Says: Crypto crime has shifted from breaching centralizing entities to exploiting decentralized projects, according to a new report.

Unstoppable Domains Hits Unicorn Status With $65M Series A: The Series A was led by Pantera Capital, with Polygon, CoinDCX and CoinGecko also contributing.

Direct Blockchain Scrutiny Can Spot Financial Hacks, but Not Easily, German Study Says: Officials can cut out the middleman by examining public ledgers, a report published by the BaFin financial regulator said – but at a cost.

Cathie Wood's Ark Invest Offloads Over 1.4M Coinbase Shares as COIN Price Falls: Coinbase shares have taken a big hit following disappointing results and a report that the company is being investigated by the U.S. Securities and Exchange Commission.

Alameda Research Leads $3.25M Seed Round for Trustless Media: The New York-based company lets creators tokenize TV productions with NFTs.

Longer reads

Will Stablecoins Be Tethered to the Fed? Lawmakers Have Circled That Option: The U.S. central bank may get a leading role in policing stablecoins, according to legislation being negotiated in the House of Representatives. Crypto analysts weigh what that means.

Other voices: Bitcoin Prices Are Rising. Cryptos Are in Powell’s Grip Ahead of the Fed Decision.

Said and heard

"(1/5) FUD benefits no one except the FUDers. It misleads investors and harms the industry’s image and market confidence. To build a crypto space with less FUD, #KuCoin is going to launch an Anti-FUD Fund. Currently, the fund will mainly focus on..." (KuCoin CEO Johnny Lyu/Twitter) ... "Cathie Wood of $ARKK just sold nearly 1.41 million shares of Coinbase, $COIN, at all-time lows of $53. The average cost average that $ARKK purchased $COIN at was $254.65." (@unusual_whales)